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Market Insight for January 16
“I see 2026 as a bridge year, moving from something negative to something more positive,” said Mr. Tal, managing director and deputy chief economist at CIBC Capital Markets Inc.
“In my view, the fundamentals are in place. Once the supply issues in the condo market are resolved, likely two or three years down the road, we’ll begin to see some upward pressure.”
Mr. Tal said many buyers have been sitting on the sidelines, anticipating additional interest rate cuts.
“The Bank of Canada has made it clear they’re done cutting for now. It would take something very severe for them to lower rates again,” he said. As people come to terms with that reality and recognize that rates have likely bottomed out, more buyers will step back into the market. That should provide a modest boost to the spring market.”
“With rates more or less where they are, the housing market is positioned to show a healthy recovery in 2027,” Mr. Tal added.
That said, Toronto remains a tale of two markets. The pre-sale and newly built condo sector are very different from the low-rise market, including semis, townhomes and detached houses. The low-rise segment has proven resilient and continues to appeal strongly to millennials.
The only factor that could lower the prices for ground-oriented housing would be an influx of boomer-age homeowners selling and adding supply, something Mr. Tal says is unlikely to happen in the near term.
“Unfortunately, I don’t see house prices going down in any significant way,” he said. Supply conditions are different, inventory levels are different, and demand remains intact. With interest rates stabilizing, that demand should persist. This won’t be a booming market, but prices will stay relatively elevated. It’s definitely a tale of two markets.”
“Another reason Mr. Tal views 2026 as an improving year is the political pressure facing U.S. President Trump as midterm elections approach. Resistance from his base could grow due to the perceived negative impact of tariffs, and for Canadians, uncertainty around trade barriers may ease as tariffs are reduced. Time is not on the President’s side,” said Mr. Tal.
“Of course, anything can happen,” Mr. Tal said. “But I think that’s a fairly reasonable outlook.”
Once stability returns, Mr. Tal expects the condo market to re-emerge in a different form.
“The condo market will recover,” he said. “The real question is what that market will look like going forward. You cannot go through this kind of shock without a change.”
Those changes include a much smaller investor presence. Future investors are more likely to be long-term holders rather than flippers. In addition, only well-capitalized, established developers will remain active, and they’ll need to focus on building larger units.
With speculation no longer driving the market, the overall mindset around real estate is shifting. Presales, which require long-term commitments, are inherently risky. As a result, buyers are gravitating toward existing condo units, which offer greater certainty.
“The average size of units will start to increase significantly, and we are starting to see that already” Mr. Tal said.
It will be different from the days when a lender required 70 per cent of the building to be sold before the developer got their construction financing.
“Borrowing will be more challenging, but that’s the new reality,” Mr. Tal said. And it’s consistent with how condo markets operate in most parts of the world.”
Mr. Tal added that now is an ideal time for governments to introduce incentives for purpose-built rentals. Regardless of market cycles, he said, government policy should always prioritize housing security. “The key questions are: what are you building, and who are you building it for?”